Welcome to the website of the law office of Steven D. Rubin.  Mr. Rubin has been licensed to practice law in the State of Florida since 1981. His office  is located at 200 West Palmetto Park Road, Suite 301, Boca Raton, Florida 33432. He is admitted to practice before all of the State Courts in Florida and is a Florida Bar Board Certified Real Estate Attorney.

THE MANY HATS OF THE REAL ESTATE CLOSING ATTORNEY – SOME HATS CAN BE WORN AT THE SAME TIME, BUT OTHERS MAY NOT

In a typical real estate transaction, an attorney may owe duties to the client, the lender, the title insurer, and the other party to the purchase and sale. For example, in Palm Beach County, an attorney could simultaneously be the escrow agent who holds the deposit, the title agent who examines evidence of title and issues the title policies to the buyer and lender, the closing agent who prepares the settlement statement and disburses the funds, and the attorney for the seller. The law imposes a variety of duties on the person who acts in these various capacities, and each representative capacity forms the basis for a potential conflict of interest. If an actual conflict of interest arises,  withdrawal from the representative capacity is required.

The various duties owed to the parties in a real estate transaction are created by both  law and  contract. An attorney has a fiduciary duty to her client and must provide legal representation in a non-negligent manner, with honesty and in good faith (see e.g. Mallard v. Dowell, 528 So.2d 512 (Fla. 3DCA 1988), rev, denied 539 So.2d 475 (Fla. 1988). A title agent has the duty to comply with the title insurance Statute and Regulations, and the contractual duties imposed by the title underwriter. The lender in a transaction will require the title or settlement agent to indemnify and hold the lender harmless if the agent breaches the lender’s closing instructions or commits a fraud.  The escrow agent holding the funds has a fiduciary and contractual duty to the buyer and seller to disburse the funds as directed by the parties’ contract (see e.g., United American Bank of Central Florida v. Seligman, 599 So.2d 1014 (Fla. 5DCA 1992). The closing agent has a fiduciary duty (with some exceptions) to the buyer and the seller to conduct and supervise the closing in a non-negligent manner, and with honesty and in good faith (see e.g., Askew v. Allstate Title & Abstract Co., Inc., 603 So.2d 29 (Fla. 2DCA 1992) and Gerson v. Broward County Title Co., 116 So.2d 455 (Fla. 2DCA 1959).

In the recent case of Moreno v. First International Title, Inc., 40 Fla.L.Weekly D1834 (Fla. 3DCA August 5, 2015), the purchaser, after the closing, sued the closing agent (who was not an attorney) alleging that it had breached its fiduciary duty because it did not clearly communicate to the purchaser that the County had imposed code enforcement liens against the property in the amount of $64,000 (presumably because the seller or the seller’s predecessor had constructed additions to the home without obtaining the necessary permits). The purchaser did not speak or read English. Before the closing, the closing agent required the purchaser to sign an acknowledgement of the existence of the code enforcement liens and a hold harmless agreement which attached a copy of each lien. The purchaser did not have an attorney, and even though she could not speak or read English, she signed the documents. Did the closing agent breach its fiduciary duty to the purchaser by closing the transaction, notwithstanding the existence of the code enforcement liens  and the purchaser’s inability to read or speak English?

The Court upheld the trial court’s summary judgment order in favor of the closing agent. The Court concluded that there was “no fraudulent inducement to sign, purposeful or negligent misinformation, or any other action on the closing agent’s part to prevent the buyer from reading the documents and inquiring about the contents.”  Fair enough – the closing agent advised the purchaser of the liens and code enforcement proceedings, and the purchaser was then able to decide, based on full knowledge of the facts, whether to close (query whether the title agent included the liens as exceptions in the title policy and whether the real estate contract disclosed the liens and required the purchaser to accept title subject to the liens).  In Moreno, the closing agent conducted the closing electronically, and presumably  the agent was not present at closing and did not know the purchaser could not speak or read English. Had the closing agent known those facts, would the result have been different? It is further noted that litigation continues against the real estate agent and the realty company.

To further complicate an attorney’s consideration of what duties she may owe to the  parties in a real estate transaction, if the attorney is representing one party to the transaction, then she must decide what she needs to explain  about  the transaction to the unrepresented opposing party to avoid an ethics complaint against her. As stated by the Florida Supreme Court, when there is  an elderly, unsophisticated opposing party and the terms of the transaction are very favorable to the attorney’s client,   “[f]irst, the attorney must explain to the unrepresented opposing party the fact that the attorney is representing an adverse interest. Second, the attorney must explain the material terms of the documents that the attorney has drafted for the client so that the opposing party fully understands their actual effect. When the transaction is as one-sided as that in the present case, counsel preparing the documents is under an ethical duty to make sure that an unrepresented party understands the possible detrimental effect of the transaction and the fact that the attorney’s  loyalty lies with the client alone. R. Regulating Fla.Bar 4-1.7.” Florida Bar v. Bellville, 591 So.2d 170 (Fla.1991).

However, compare what the Fourth District Court of Appeal has said about an attorney’s legal duty (as opposed to an ethical duty) to the unrepresented opposing party in a real estate transaction. In the following case, the attorney represented the seller and allegedly negligently prepared the closing statement which caused the unrepresented buyers to pay too much money at the closing. The Court affirmed the dismissal of  the buyers’ claim against the seller’s attorney and stated:

“The question is whether the attorney owed sufficient duty to the buyer so as to require him to account to the buyer for his negligence, if any. We think not. The attorney was hired by the seller to be his attorney, no representations were made that the attorney was representing both parties (which indeed he is not permitted to do, EC 5-14, Code of Professional Responsibility), and the buyer was quite free to hire his own lawyer if he was unfamiliar with preparing for real estate closings. The buyers cannot hold the sellers’ attorney liable for negligence in preparing a closing statement. The attorney’s allegiance was solely to the sellers and there is no allegation the attorney intentionally misled anyone in the matter.” Adams v. Chenowith, 349 So.2d 230 (Fla. 4DCA 1977)

These cases are  good examples of why a party to a contract for the sale and purchase of real estate should retain a Florida Bar Board Certified Real Estate Attorney to represent that party’s interests in the transaction. A Board Certified attorney is an expert in the area of law for which he has been certified, and has special skills, knowledge, and competence to handle the matter with the highest degree of professionalism and ethics.